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Investing in a Dynamic Population and Workforce

Speech delivered by Yee Jenn Jong at the Institute of Policy Studies Corporate Associates luncheon at Regent Singapore on 22 March 2013

It is my privilege to be in the presence of many distinguished guests who are captains of their industries and top researchers. I thank IPS for inviting me to speak.

I have titled my talk “Investing in a Dynamic Population and Workforce”. I will touch on the fundamental premise the Workers’ Party’s population policy is based on, that is, when we foster a dynamic Singaporean population and workforce, we can achieve a sustainable economy in the long term. For a more dynamic workforce, I will talk about three areas with room for improvements: productivity, work-life harmony, and female labour force participation. We also need to adjust our mindset as political and business leaders of the nation and to think outside the box to foster a creative economy held up by innovative workers.

Let me begin by arguing that we need to shift our comparative lenses. We tend to think of ourselves as a global city. Implicit in this mindset are the specter of our nearest competitor, Hong Kong, and to want to be like New York and London. But let us not forget that we are a country. As a country, the government’s primary responsibility is not to the economy but to the people. Economic growth must not be an end in itself, but the means to the people’s prosperity. I feel it is better to compare ourselves with small and dynamic countries that have achieved sustained economic success.

Let us take a look at this table, which was published in The Economist on 2nd February this year, just as we began the White Paper debate.

The Economist 2 Feb 2013

Singapore is ranked 7th. It is interesting to note that the top 5 countries in the list are small and dynamic countries. They are Sweden, Denmark, Finland, Norway, and Switzerland. They are not unfamiliar. The Nordic countries are often brought up in our debates on education reforms, birth rate promotion, and social development. Switzerland was once our gold standard, as we pursued growth towards a Swiss standard of living in the 1990s.

Perhaps it should be again. The problem was that we defined the Swiss standard of living in terms of GDP per capita. We assumed perhaps correctly then, that growth would be shared and distributed more or less equitably. This assumption has not held. We now have one of the highest income inequality in the world. There are many reasons for this and I would not have time to discuss them today.

If you take a look at the table again, you will see an indication of why the wealth of our nation is not shared equitably. Singapore ranks in the top 5 in global competitiveness, ease of doing business, global innovation, and corruption perceptions. But when it comes to human development and prosperity, we are 26th and 19th respectively. Prosperity refers to the Legatum Prosperity Index, which goes beyond GDP. It also measures other factors such as entrepreneurship and opportunity, governance, education, health and social capital.[1]

This suggests that we have structured our economy to enable businesses to drive growth and be able to generate profits, but we have under-developed our people, such that Singaporean workers are not benefiting as much from growth as their peers in other developed countries. In 2011, our wage share as a percentage of GDP is 42.3%.[2] This is low compared with developed economies such as the United Kingdom (53.8% in 2011), Canada (52.3%), Switzerland (59.7%), Australia (47.5%) and the European Union (49.2%), which ranges from nearly 50% to almost 60% share of the GDP for wages.[3]

More than ever, there is a great urgency to invest in and to develop the Singaporean workforce to ensure our growth is driven by Singaporeans at the core.

The Workers’ Party shares the government’s target of 2 to 3% productivity growth. The challenge is in achieving these goals. Last month, MTI reported that labour productivity fell by 2.6% last year. Labour productivity has fallen for five consecutive quarters. There is therefore urgency to improve labour productivity, particularly in industries where we lag far behind international benchmarks.

The second area we need to invest in is work-life harmony. A study by the Ministry of Social and Family Development found that only 23 per cent of workplaces offer flexible working hours. According to the study, work-life harmony has not improved over the last six years. Our score is 63 in 2012 out of a possible 100, no different from 64 in 2006.[4] The numbers clearly show that we need to increase our efforts. The MSF study found that those who scored higher on work-life harmony were more likely to be engaged and productive in the workplace, have better physical and mental health, and reported better family relationships and desire for more children. In other words, work-life harmony is important in improving our national TFR and promoting productivity growth.

One tool to promote work-life harmony is flexi-work arrangements. A recent study by the National Bureau of Economic Research in the US found that work from home employees performed 13 to 22% better than those in the office.[5] Flexi-work arrangements would also attract stay-at-home mothers to enter the workforce.

This is the third area Singapore needs to invest in: female labour force participation. In 2012, there were over 160,000 economically inactive residents who intended to look for a job within the next two years. Of these potential entrants, 64% were female.[6] There were around 270,000 economically inactive female residents aged 15 to 69 years old. This is a big potential pool of new workers.

The Labour Force Participation Rates (LFPR) for women in the prime working ages of 25 to 54 years is 77% in 2012.[7] Compared internationally, 77% is not the best that we can achieve for a developed economy with an educated workforce. There is room for the rate to rise to 85%. Some may also argue that the trade-off for higher female LFPR is lower TFR. This is where our comparative orientation to the small dynamic countries would help. Denmark, Finland, Norway and Sweden have prime-age female LFPR of between 83% to 88%, and TFR between 1.76 and 1.90.[8] Promoting female LFPR may actually have the reverse effect of improving TFR, as the sense of security on the part of women and overall gender equality are important factors in promoting birth rates.[9]

Ultimately, Singapore’s long-term goal should be to improve our TFR to foster a dynamic workforce. Meanwhile, we need to improve overall labour force participation rate to moderate the effects of an ageing workforce. Our current labour force participation rate is 72% for residents aged 15 to 69 years old. The Workers’ Party has called for this rate to be improved incrementally to 79% by 2025 through facilitating elderly reemployment and encouraging more women to re-enter the workforce, while we strive to improve our TFR. Again, let’s look at other small dynamic countries. Switzerland has a labour force participation rate of 80% for ages 15-64 years old and 72% for 15-74 years old. Switzerland has also climbed out of a low TFR of 1.38 in 2001 to achieve 1.52 in 2011.[10]

Finally, I wish to conclude with some personal thoughts about the challenges facing us. Besides being an NCMP, I am also in the business community. I ran an education group as an employed professional in the late 1990s and have started various education-related businesses since 2000.

There are indeed great challenges ahead as our population ages and our economy restructures to move away from the labour-fuelled growth that we are familiar with. Our foreign workforce is already at 1/3 of our total workforce. Singaporeans today form only 62% of our population. Working through the population data with various scenarios, we concluded that the window to restructure Singapore’s economy is a rather short one if we are to avoid massive new inflows of foreigners that will further greatly dilute the core Singapore identity. From now till 2020, the local labour force is still increasing as we will have more new job entrants than those retiring. During the remaining 8 years of this decade, we will all need to work together to raise productivity, find new markets and have more innovation driven growth.

I am reminded of a Chinese word for crisis, called “危机”。“危” stands for “危险” or danger while “机” means “机会” or opportunity. There are dangers and challenges right now for those in the business community. We are forced to adjust to a situation of tight manpower and changes in government policies and regulations. Technology changes are much faster than before. Global connectivity means greater competition for our businesses.

Yet, every time in history when there is great danger, there are opportunities too for those who can see the changes that are coming, adapt to it faster than others, and seize new opportunities that emerges. This is because the playing field may become leveled in a crisis or when there are changes in the operating landscape. Those that emerge first with good solutions will be winners.

I am reminded of my own experience when I ran an education technology business during the dotcom boom. The industry saw intense competition. Many players were wiped out within a couple of years. Then a great crisis came upon Singapore, in the form of SARS. Ironically, it was in this time of crisis that our clients became aware of the need for our type of solutions. Out of the crisis and the massive industry consolidation that took place, a few players managed to emerge with viable business models and growth.

Every situation is different and every industry has its own challenges. My encounter with “危机” or crisis, convinced me that we need to keep looking at the “机会” or opportunity every time there’s “危险” or danger.

In 6 years’ time, Singapore will celebrate the 200th anniversary of Sir Stamford Raffles’ founding of modern Singapore. Next to the parliament house stands a statue of Raffles, with the inscription “On this historic site, Sir Thomas Stamford Raffles first landed in Singapore on 28th January 1819 and with genius and perception changed the destiny of Singapore from an obscure fishing village to a great seaport and modern metropolis.”

Singaporeans have had genius and perception in the past to overcome and grow stronger with each great challenge. Today, Singapore is at another crossroad, already a great seaport and modern metropolis but in need of a new model to move forward. We will need to search deep inside ourselves, build up the Singapore core, both in the population and in the workforce and have confidence to take ourselves forward in this 21st century.